An employee holds a shopping bag as he calls a customer at the Levi Strauss & Co. flagship store in San Francisco on March 18, 2019.
David Paul Morris | Bloomberg | Getty Images
Levi Strauss & Co. on Thursday reported a double-digit decline in sales for the first quarter of the fiscal year as store closings in Europe and lower foot traffic in the US due to the Covid pandemic weighed on results.
However, the denim maker has improved its sales and earnings outlook for the first half of the year, provided the global health crisis doesn’t get worse from here. CFO Harmit Singh said in an interview with CNBC that the company expects sales to return to pre-pandemic by the fourth quarter of 2019.
Shares rose more than 6% in after-hours trading.
“These results suggest really good evidence that we will emerge from the pandemic as a stronger company,” CEO Chip Bergh told CNBC. “We have exceeded our own expectations internally [and] Exceeded external expectations, although a third of our stores in Europe closed for the entire quarter. “
Here’s how the company performed for the quarter ended February 28, compared to analyst expectations based on a survey by Refinitiv:
- Earnings per share: adjusted 34 cents compared to expected 25 cents
- Revenue: $ 1.31 billion versus $ 1.25 billion expected
Levi’s net income declined slightly to $ 152.5 million, or 35 cents per share, from $ 152.7 million, or 37 cents per share, the previous year. Without one-off costs, the company earned 34 cents per share, better than the 25 cents forecast by analysts, according to Refinitiv.
Total revenue declined 13% from $ 1.51 billion a year ago to $ 1.31 billion. That was better than the $ 1.25 billion forecast by analysts.
The retailer said the double-digit year-over-year sales decline was mainly due to lower foot traffic in its stores during the pandemic, as well as ongoing store closings in some markets where Covid restrictions remain in place. In Europe, for example, more than 40% of Levi stores are currently closed, with others working at reduced hours, the company said.
Levi wholesale sales were down 4% in the most recent quarter, an improvement over the prior period.
Direct sales declined 26% as fewer customers visited Levi’s stores, especially in markets that rely on tourism. The decline was partially offset by a 25% increase in proprietary e-commerce sales during the quarter, Levi’s said. Total online sales, which include wholesale partner digital sales, increased 41%.
Although business performance is improving, earnings and sales are expected to continue to be “significantly affected,” at least through the second quarter of 2021, Levi’s said.
The company has raised its prospects for first-half sales and earnings, assuming the pandemic doesn’t worsen.
Revenue is now expected to grow 24% to 25%, and adjusted earnings are expected to be between 41 and 42 cents, which is 7 to 8 cents in earnings for the second fiscal quarter. Analysts had asked for earnings of 5 cents per share for the second quarter.
Levi’s shares are up nearly 25% since the start of the year. The company has a market capitalization of $ 10 billion.
The full Levi’s press release can be found here.